Handy money-laundering now bundled with tampered sales terminals

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Video A Russian-speaking man casually shows on camera how he can download a punter's bank-card details and PIN from a hacked card reader.

In a video demonstrating a tampered sales terminal, a card is swiped through the handheld device and a PIN entered - just as any customer would in a restaurant or shop. Later, after a series of key-presses, the data is transferred to a laptop via a serial cable.

Account numbers and other sensitive information appear on the computer screen, ready to be exploited. And the data can be texted to a phone, if a SIM card is fitted to the handheld.

We're told the footage, apparently shown on an underworld bazaar, is used to flog the compromised but otherwise working kit for $3,000 apiece - or a mere $2,000 if you're willing to share 20 per cent of the ill-gotten gains with the sellers under a form of hired-purchase agreement.

Crucially, the gang selling this device offers a money-laundering service to drain victims' bank accounts for newbie fraudsters: a network of corrupt merchants are given the harvested card data and extract the money typically by buying fake goods and then cashing out refunds. The loot eventually works its way back to the owner of the hacked card reader.

A copy of the web video was passed to The Reg, and is embedded below. We have rotated part of the footage so it's easier to read the on-screen text.

Electronic security consultancy Group-IB said the modified Verifone VX670 point-of-sale terminal, shown above, retains in memory data hoovered from tracks 1 and 2 of the magnetic stripe on the back of swiped bank cards, as well as the PIN entered on the keypad - enough information for fraudsters to exploit.

The setup suggests the sellers are based in Russia. In the video, a credit card from Sberbank, the country's largest bank and the third largest in Europe, is used to demonstrate the hacked terminal's capabilities.

If a SIM card for a GSM mobile phone network is fitted to the doctored device, the information can be sent by SMS rather than transferred over a serial cable, explained Andrey Komarov, head of international projects at Group-IB.

He told us crooks tampering with point-of-sale (POS) terminals and selling them isn't new - but the bundling of money-stealing support services, allowing fraud to be carried out more easily, is a new development in the digital underground.

"We have detected a new group that sells this modified model of POS terminals and provides services for illegal cash-outs of dumped PINs through their own 'grey' merchants: it seems they buy fake stuff, and then cash-out money," Komarov said.

"It takes less than three hours. According to our information, this kind of service is really new, and it is also being used by different cyber-criminals against the Russian bank Sberbank."

Komarov told El Reg that the emergence of hacked card readers is due to banks improving their security against criminals' card-skimming hardware hidden in cash machines and similar scams. Planting data-swiping malware in POS handhelds out in the field is possible, but it is fairly tricky to find vulnerable terminals and infiltrate them reliably without being caught.

It's a touch easier to buy a tampered device and get it installed in a shop or restaurant with the help of staff or bosses on the take. This creates a huge potential market for fraudsters, according to Komarov.

Scam warnings

Banking giant Visa has issued several alerts about this kind of fraud along with occasional warnings about device vulnerabilities - such as this warning from 2009 [PDF]. And social-engineering tricks [PDF] in which fraudsters pose as Visa employees carrying out adjustments to terminals - while actually compromising them - has been going on for years.

One alert [PDF] from Visa, dating from 2010, explains how thieves worked in the past and the steps merchants can take to defend against the fraud: anti-tampering advice from this year can be found here [PDF], an extract of which is below:

The impact of this type of crime can be significant to all key parties involved in card acceptance. An attack can not only undermine the integrity of the payment system, but diminish consumer trust in a merchant’s business. In response to this emerging threat, acquirers, merchants and their processors need to proactively secure their POS terminals and make them less vulnerable to tampering.

A more recent advisory on combating this type of fraud, issued earlier this year by Visa, can be found here [PDF].

Avivah Litan, a Gartner Research vice-president and an expert in banking security and related topics, said that tampering with card readers has been going on for years. She agreed with Group-IB's observation that since banks are investing more in securing cashpoints, penetrating point-of-sale terminals can be an easier way to make money for criminals.

"The bad guys will go after anything they can, but it can be easier to find dishonest merchants to cooperate in running tampered terminals [to harvest bank details] than going after ATMs," Litan told El Reg, adding that this kind of fraud was rife in South America, particularly in countries such as Brazil.

But Group-IB's Komarov believes the Russian-speaking fraudsters behind the black-market sale of hacked sales terminals are targeting the international market as well as crims in the motherland. "The example they showed for Sberbank was just because they also use it against Russian-speaking countries, as they have Russian-speaking roots," he explained.

We passed on Group-IB's research to Verifone at the start of this month, along with a request for comment on what could be done to frustrate the trade of tampered card readers through underground markets and similar scams. We have yet to hear back from the device manufacturer. We'll update this story if we hear more. ®